Why Multifamily Investments Are Ideal for 2025
Multifamily is Showing Signs of Strong Investment Potential
by Andy Bates
Even as the first quarter of 2025 has passed, thousands of investors are still uncertain of where and how to do their business in real estate. With final 2024 figures firmly in view, it is easy to understand why that might be.
Stymied rent figures in 2024 have made it difficult for investors to source rent-ready properties that cashflow well enough to be worth the investment amid a high-rate environment. With increased difficulties in finding profitable short-term fix-and-flip deals and other forms of residential investment, investors may be wondering where to focus their energies as they work through 2025.
Considering the state of the industry, the economy, and the fundamentals at play in various markets, multifamily housing may be the ideal candidate for investors in 2025.
Perfect for Family
Things have been looking up for multifamily investments since the onset of 2025. The Mortgage Bankers Association released a baseline forecast update at their 2025 Expo indicating that total commercial and multifamily mortgage borrowing and lending is expected to rise this year to the tune of $583 billion. This would be a 16% increase compared to 2024.
For investors, it is helpful to not only know what is on the horizon but also where to look. CB Richard Ellis’ (CBRE) 2025 multifamily analysis expects that multifamily units will see their biggest boom in inventory since the 1970’s with much of this new supply to be introduced in the Sun Belt and Mountain Regions.
With projects started over the last few years coming to fruition in 2025, these markets are slated to grow their inventories by as much as 20%. Rent rolls are expected to trend positively along with this newly available inventory despite a marked decrease in multifamily construction starts leading into 2025. A shrinking construction pipeline coupled with strong rental demand will ultimately lower vacancy rates.
These divergent trendlines will participate in above-average rent growth into 2026. Ultimately, 2025 multifamily vacancies are expected to end at just south of 5%, with annual rent growth increasing by at least 2.6%.
What Brings Us Together
With such a positive outlook on the horizon, it is important for investors to understand why the position of the multifamily market seems so strong. Per Yardi Matrix updates in 2025, rents show signs of growth after months of negative signaling. This began with an average three dollar increase in January and continued with a five dollar increase in March. This seemingly steady rent growth over the first few months of 2025 is likely driven by a number of factors.
These factors include fundamentals such as job growth. Per the summary by the United States Bureau of Labor Statistics, employment figures increased by over 250,000 in December of 2024 alone. This figure does not include jobs from the farming facet of the agricultural sector of the market, so the cause of this boost in employment cannot be neatly laid at the feet of policy decisions. Into 2025, job growth remains strong with the bureau reporting another 228,000 in payroll employment in March.
Another such factor impacting rent growth is the formation of new households. As an increased number of young adults are seeking their own place and independence, many of these young adults are filling rental units as mortgage rates and even entry level home prices remain out of reach, thus participating in overall rental demand.
Economic Policy
Regardless of industry metrics shedding a positive light on prospects for 2025, it is understandable that some investors may remain reserved for one glaring reason: economic policy. With recent policy decisions leading to noticeable fallouts in economic areas, what can investors hope to expect?
It is important to remember that times of change are also times of opportunity. With international forces coalescing into what has been referred to as a “trade war,” there has been much chatter, virtually across the board, about the potential for what could be considered a recession. The thing to remember about recessed environments in the market is that, historically, interest rates tend to drop in response. Potential interest rate decreases can foster investment activity, freeing up investor capital to tackle more projects than they could in the higher rate environments we have seen today. This combined with the influx of job openings seen in the first quarter of the new administration may suggest that rent rolls could remain strong into 2026, particularly from the perspective of how policy may impact the market.
Do More Together
In 2025, investors who may be unsure of where to focus their business can rely on proven data and industry knowledge to help find a sense of direction. With multiple, reputable agencies projecting positive trends in the market, multifamily is showing signs of strong investment potential.
From record levels of inventory to a marked increase in projected transactions for the asset class, it is worth it for investors to investigate a multifamily strategy. This becomes increasingly clear with an awareness of current and projected rent figures, which shows signs of strength and appreciation well into 2026.
It is especially true at a time when lucrative fix-and-flip deals may feel hard to come by and a higher-rate environment has been eating into the returns for many who commonly deal in smaller unit count, held investments. Investors who want to take advantage of these opportunities should learn all they can about the workings of multifamily investments and find lenders they can trust in pursuit of these projects.
